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/raid1/www/Hosts/bankrupt/TCREUR_Public/180822.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, August 22, 2018, Vol. 19, No. 166 Headlines C Y P R U S RESERVE INVEST: Moody's Withdraws B3 LT FC Issuer Rating I R E L A N D OPENHYDRO: High Court Appoints Interim Examiner N E T H E R L A N D S IGNITION TOPCO: S&P Assigns 'B' Long-Term Issuer Credit Rating R U S S I A ALJBA ALLIANCE: Moody's Withdraws B3 LT Bank Deposit Rating CB RTBK: Liabilities Exceed Assets, Assessment Shows UFC BANK: Liabilities Exceed Assets, Assessment Shows U N I T E D K I N G D O M GPL GROUP: Cash Flow Difficulties Prompt Administration HOMEBASE: Set to Close 42 Stores, Seeks CVA Approval HOUSE OF FRASER: Flagship Oxford Street Store to Remain Open OFFICE OUTLET: Mulls Shop Closures, May Enter Into CVA ********* =========== C Y P R U S =========== RESERVE INVEST: Moody's Withdraws B3 LT FC Issuer Rating -------------------------------------------------------- Moody's Investors Service has withdrawn the long-term foreign- currency issuer rating of B3 of Reserve Invest Cyprus (RIC). At the time of the withdrawal, the outlook on the company was stable. RATINGS RATIONALE Moody's has decided to withdraw the rating for its own business reasons. Domiciled in Cyprus, RIC is a securities company, which business model is designed to retain the company's strategic stake in Lukoil, PJSC (Baa3, Positive). As of December 31, 2017 RIC reported total assets under IFRS of US$1.7 billion, and total equity of US$1.5 billion. In 2017, RIC posted net loss of US$24 million. ============= I R E L A N D ============= OPENHYDRO: High Court Appoints Interim Examiner ----------------------------------------------- Aodhan O'Faolain at The Irish Times reports that the High Court has appointed an interim examiner to the OpenHydro group which specialises in developing turbines that generate electricity from tidal energy. Ms. Justice Miriam O'Regan on Aug. 17 appointed insolvency practitioner Ken Fennell as interim examiner to Dublin-based OpenHydro Group Ltd and its subsidiary Open Hydro Technologies Ltd after being informed that an independent experts' report had shown the companies had a reasonable prospect of survival if certain steps were taken, The Irish Times relates. These include securing new investment, restructuring the group and the appointment of an examiner who would put together a scheme of arrangement with the group's creditors that would allow it to survive as a going concern, The Irish Times discloses. The application for examinership comes just weeks after the High Court appointed Michael McAteer -- michael.mcateer@ie.gt.com -- and Stephen Tennant -- stephen.tennant@ie.gt.com -- of Grant Thornton as joint provisional liquidators to the firms after being told both companies were "seriously insolvent" with debts of approximately EUR280 million, The Irish Times notes. The appointment of provisional liquidators was sought by OpenHydro's French parent and largest shareholder Naval Energies, which had invested EUR260 million in the firms, The Irish Times states. The firm, as cited by The Irish Times, said it was no longer prepared to support the enterprises because the companies were loss-making. The company has operations in Ireland, Scotland, Canada, France and Japan. ===================== N E T H E R L A N D S ===================== IGNITION TOPCO: S&P Assigns 'B' Long-Term Issuer Credit Rating -------------------------------------------------------------- S&P Global Ratings assigned its 'B' long-term issuer credit rating to Ignition Topco BV (Topco), the parent and owner of IGM Resins (IGM), a Netherlands-headquartered producer of ultraviolet (UV) curable materials, with a focus on high-value photo- initiators (PI). The outlook is stable. S&P said, "At the same time, we assigned our 'B' long-term issue rating to IGM's first-lien senior secured facilities, including a EUR260 million term loan B (TLB) due 2025 and EUR50 million revolving credit facility (RCF) due 2024, issued by Ignition Midco BV, a finance subsidiary of Topco. The recovery rating on the first-lien senior secured facilities is '3', reflecting our expectation of 50%-70% recovery (rounded estimate: 55%) in the event of a payment default." The ratings are in line with the preliminary ratings S&P assigned on June 29, 2018. The private equity firm Astorg acquired IGM from Arsenal Capital Partners in July this year. The financing for this acquisition comprises a EUR260 million first-lien TLB due 2025, a EUR65 million second-lien term loan due 2026 (not rated), and EUR50 million first-lien RCF due 2024 (split into EUR25 million working capital line and EUR25 million capital expenditure (capex)/acquisition line). The transaction was further supported by equity provided by the private equity sponsor. The ratings reflect the high debt at closing of the transaction, which primarily includes the EUR325 million term loans, translating into about 6.1x S&P Global Ratings-adjusted debt to EBITDA in 2018. However, S&P anticipates moderate deleveraging in coming years, with the debt-to-EBITDA ratio improving to below 6x in 2019 and below 5.5x in 2020. Headquartered in the Netherlands and founded in 1999 as a specialty chemicals distribution company, IGM is a leading manufacturer and supplier of UV curable materials with a focus on supplying high-value PI to the high-growth UV coatings and inks market. It also provides acrylates and additives as complementary UV curing material solution, as well as specialty intermediates to the pharmaceutical and agricultural industries. S&P said, "We anticipate that IGM will increase its revenues by 6%-8% in the next two years, benefiting from its leading market position in PI production and the favorable growth trend in the global UV curing materials market, especially in the high-value specialty PI segment supported by new product launches. We expect adjusted EBITDA margins will remain at about 20% in 2018-2019, supported by IGM's topline growth, positive product mix effect due to increasing shift toward high-value specialty PI, and cost efficiencies from re-insourcing of PI production after the BASF acquisition. Together, we expect these factors will offset cost inflation and ongoing pricing pressure, especially for non-PI products. Helped by healthy margins and relatively low capex, due to its asset-light business model and moderate working capital requirements, we expect IGM will sustain a fair level of free operating cash flow (FOCF) generation in the coming years. Despite the improving trend, debt to EBITDA is likely to remain above 5x and funds from operations (FFO) to debt below 12% in the next couple of years. "The main constraints on our assessment of IGM's business profile include its relatively small size, with our forecast of adjusted EBITDA of more than EUR50 million in 2018, as well as a relatively narrow product focus, with PI products accounting for the majority of sales and gross profit in 2017. This is somewhat mitigated by a broad offering of tailor-made PI solutions, with complementary UV curable materials including acrylates and additives. Despite demonstrating a high growth rate, the company's main PI market is relatively niche, in our view, with a total market size of about EUR400 million in 2017." At the same time, the business risk profile is supported by IGM's global leading position in the high-growth UV curing materials market, its strong technology capability with a large patent portfolio covering over 100 active patent families, and long-term relationships with a diversified customer base. In addition, S&P views IGM's revenue base as geographically well diversified, albeit with some concentration in mature markets with Europe and the U.S. accounting for 46% and 20%, respectively, of total sales in 2017. Remaining sales are generated in Asia (32%, mainly China and Japan) and South America (2%, mainly Brazil). Since the acquisition of BASF's PI business in 2016, IGM is the No. 1 producer of UV PI globally, with a market share of above 40%. Moreover, IGM has a clear focus on high-value-added specialty PI products, and only a minor portion from merchant products. In comparison, most of other PI players are Chinese companies selling outside China through distributors of merchant products. As a result, IGM generates leading margins in the PI industry. S&P estimates IGM will achieve an adjusted EBITDA margin of about 20% from 2018, further supported by its integrated position in the value chain. S&P said, "We anticipate the UV curing materials market will grow 5%-6% per year on average over 2018-2022. We expect the PI segment will expand at a faster rate than the overall market, as a result of a push for safer (low migration) and greener products, and technical developments. We think IGM is well positioned to benefit from favorable growth outlook and increasing penetration of UV curing, given the integration of BASF's PI business, its planned new product launches, and improved production capacity across factories." In addition, IGM benefits from long-term relationships with large customers like 3M and Akzo Nobel, with average relationship of over 15 years. It has shown a track record of maintaining customers with retention rates above 95%. This is mainly thanks to the company's tailor-made solutions, which are critical specified components in customers' products and relatively difficult to replicate with high switching costs for customers. IGM serves a reasonably diverse set of end markets, including packaging and printing (47% of sales); wood, plastic, and metal coatings (25%); electronics (12%); adhesives (5%); and other (11%). Besides having highly leveraged financial metrics, IGM's financial risk profile is also constrained by its private equity ownership, which could result in more aggressive financial policies, notably in terms of leverage tolerance and incentives to maximize shareholder returns. However, S&P understands that Astorg does not intend to make regular dividend payments following the transaction. Despite an acquisitive growth path in the past few years, as shown by the acquisition of BASF's PI business in 2016 and Caffaro assets in 2017, S&P understands that IGM will focus more on organic growth, with potential for smaller bolt-on acquisitions. S&P said, "The stable outlook reflects our expectation that IGM will continue to increase EBITDA and generate positive free cash flow. This should result in a moderate deleveraging with adjusted debt to EBITDA of 5x-6x from 2019, which is commensurate with the current rating. The stable outlook also factors in our expectation that EBITDA interest coverage will be consistently above 3x. "We could lower the rating if leverage increased as a result of a prolonged weakening of the company's EBITDA due to a severe downturn across its key markets, loss of key customers, or other significant operational issues. Under our base-case scenario, this would lead to adjusted debt to EBITDA remaining above 6x, EBITDA interest coverage below 3x, or FOCF remaining negative for a prolonged period without prospects of a swift recovery. We could lower the rating in the event of material deterioration in liquidity, a large debt-funded acquisition, or a significant dividend payment, which would signal a change to the financial policy as we currently understand it. "We could raise the rating if the company demonstrated a track record of revenue growth above the market average, and improved and sustained its adjusted EBITDA margin above 20%. This should result in adjusted debt to EBITDA sustainably below 5x and FFO to debt consistently above 12%. In addition, a strong commitment from the private equity sponsor to maintain leverage at a level commensurate with a higher rating would be important in any upgrade considerations." =========== R U S S I A =========== ALJBA ALLIANCE: Moody's Withdraws B3 LT Bank Deposit Rating ----------------------------------------------------------- Moody's Investors Service has withdrawn the following ratings of Aljba Alliance Commercial Bank: - Long-term foreign-currency bank deposit ratings of B3 - Short-term foreign-currency bank deposit ratings of Not Prime - Long-term Counterparty Risk Assessment of B2(cr) - Short-term Counterparty Risk Assessment of Not Prime(cr) - Baseline credit assessment (BCA) of b3, and - Adjusted BCA of b3 At the time of the withdrawal, the bank's long-term deposit ratings carried a stable outlook. RATINGS RATIONALE Moody's has decided to withdraw the ratings for its own business reasons. Headquartered in Moscow, AACB is a relatively small financial institution, ranking 261st by total assets and 169th by capital among Russian banks as of December 31, 2017. As of the same date, AACB reported total assets under IFRS of RUB6.7 billion, and total equity of RUB2.4 billion. In 2017, AACB posted net income of RUB61 million. CB RTBK: Liabilities Exceed Assets, Assessment Shows ---------------------------------------------------- The provisional administration to manage CB RTBK LLC (further referred to as the Bank) as appointed by Bank of Russia Order No. OD-1035, dated April 20, 2018, following banking license revocation, conducted an investigation of the Bank's financial standing and identified that the Bank's management replaced liquid assets with low-liquid securities in the run-up to the license revocation. Such actions resulted in more than RUR2.5 billion of financial damage. Furthermore, the Bank's management withdrew more than RUR1.7 billion in assets through lending to borrowers of unsatisfactory financial standing and through selling real estate to the counterparty of dubious creditworthiness on a deferred-payment basis. The provisional administration estimates the value of the Bank's assets to be no more than RUR2.6 billion, whereas its liabilities to creditors exceed RUR7 billion. On August 10, 2018, the Arbitration Court of the City of Moscow recognized the Bank as bankrupt. The state corporation Deposit Insurance Agency was appointed as a receiver. The Bank of Russia submitted the information on the financial transactions bearing the evidence of criminal offence conducted by the Bank's executives to the Prosecutor General's Office of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigative Committee of the Russian Federation for consideration and procedural decision making. The current development of the bank's status has been detailed in a press statement released by the Bank of Russia. UFC BANK: Liabilities Exceed Assets, Assessment Shows ----------------------------------------------------- The provisional administration to manage UFC Bank PJSC (further referred to as the Bank) as appointed by Bank of Russia Order No. OD-954, dated April 16, 2018, following banking license revocation, revealed operations aimed at withdrawal of the Bank's assets through lending to companies affiliated with the Bank's owners of dubious creditworthiness. Such actions resulted in more than 8 billion rubles of financial damage. Furthermore, the provisional administration has established that the Bank's officials performed actions aimed at asset withdrawal through the issue of bank guarantees to companies (including those managed by the Bank's officers) inflicting up to RUR3.3 billion of financial damage, and through the conclusion of factoring agreements with companies affiliated with the Bank's owners. The provisional administration estimates the value of the Bank's assets to be no more than 11.3 billion rubles, whereas its liabilities to creditors exceed 28.7 billion rubles. On August 6, 2018, the Arbitration Court of the City of Moscow recognized the Bank as bankrupt. The state corporation Deposit Insurance Agency was appointed as a receiver. The Bank of Russia submitted the information on the financial transactions bearing the evidence of criminal offence conducted by the Bank's executives and owners to the Prosecutor General's Office of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigative Committee of the Russian Federation for consideration and procedural decision making. The current development of the bank's status has been detailed in a press statement released by the Bank of Russia. =========================== U N I T E D K I N G D O M =========================== GPL GROUP: Cash Flow Difficulties Prompt Administration ------------------------------------------------------- Business Sale reports that civil engineering firm, GPL Group (Manchester) Limited has gone into administration. A specialist in rail, civil, utility and building sectors, the Manchester firm includes subsidiaries GPL Civil Engineering, Galvac Limited, GPL Utilities Limited, GPL Plant Limited and GPL Special Projects Limited. Ben Woolrych -- ben.woolrych@frpadvisory.com -- and Anthony Collier -- anthony.collier@frpadvisory.com -- from FRP Advisory LLP have been appointed as joint administrators and are working on future options for the firm, Business Sale relates. According to Business Sale, in a statement released by FRP Advisory, it was stated that: "The business had experienced significant cash flow difficulties in recent months due to ongoing delays with both new and current contracts, which meant the firm had no other option than to enter administration." The group's operations ceased trading on Aug. 15 of this year with the latest results for the year ending March 30, 2017 showing a loss of GBP1.67 million from a turnover of GBP25.8 million, Business Sale recounts. It seems that a dispute between GPL and a major contractor is now the subject of legal proceedings, Business Sale states. Mr. Woolrych, as cited by Business Sale, said: "Continued issues and delays with contracts meant that it became financially unviable for GPL Group to continue trading. "Our focus now is to find a suitable buyer for the business, while working closely with the directors to ensure that we achieve the best possible outcome for everyone involved." HOMEBASE: Set to Close 42 Stores, Seeks CVA Approval ---------------------------------------------------- Faiza Afzaal, writing for The Clitheroe Advertiser and Times, reports that the town's Homebase store has avoided the axe as the DIY giant announced 42 stores are set to close. Staff at the local branch will keep their jobs as a result, but around 1,500 workers across the UK could now lose their jobs, The Clitheroe Advertiser and Times discloses. According to The Clitheroe Advertiser and Times, a company spokesman said: "Homebase's sales performance and profitability declined significantly under the previous ownership over the last two years. In addition, the company has faced an extremely challenging retail trading environment reflecting weak consumer confidence and reduced consumer spending. These factors have had a significant adverse impact on Homebase's trading position. "After a comprehensive review, Homebase has concluded that its current store portfolio mix is no longer viable. Rental costs associated with stores are unsustainable and many stores are loss making. "The company is to launch a Company Voluntary Arrangement (CVA) and is seeking approval from creditors on a proposed plan to reduce its cost base in the UK and the Republic of Ireland." It is anticipated that 42 stores will close during late 2018 and early 2019, The Clitheroe Advertiser and Times notes. The firm confirmed the Clitheroe store in Queensway is to remain open, The Clitheroe Advertiser and Times states. HOUSE OF FRASER: Flagship Oxford Street Store to Remain Open ------------------------------------------------------------ BBC News reports that House of Fraser's flagship Oxford Street store will now stay open after the chain's new owner agreed revised terms with its landlord. The store had been due to close under a restructuring plan that House of Fraser announced in June, BBC notes. However, the department store group fell into administration earlier this month, and was bought by Mike Ashley's Sports Direct, BBC relates. The deal is the first covering a House of Fraser store since the takeover, BBC states. The store was one of the 31 earmarked for closure under the CVA restructuring deal that was first struck before Mr. Ashley stepped in with his GBP90 million rescue bid, BBC discloses. His plan is to keep 80% of House of Fraser's 59 stores across the UK open, BBC relays. A spokesperson, as cited by BBC, said they were working through the list on "a store-by-store basis". Property giant CBRE, which is advising Sports Direct, said negotiations over the Oxford Street outlet had been conducted at "great speed", BBC recounts. Mike Ashley's Sports Direct bought the chain just hours after it went into administration earlier this month. This means it is not legally obliged to pay suppliers money owed before its GBP90 million buyout, as their debts were part of the administration. OFFICE OUTLET: Mulls Shop Closures, May Enter Into CVA ------------------------------------------------------ Oliver Shah at The Sunday Times reports that Office Outlet, the stationery chain formerly known as Staples, is believed to be considering shop closures after engaging one of the big four accountants. According to The Sunday Times, Office Outlet, which was bought by the restructuring fund Hilco for a nominal sum from Staples' US parent in 2016, is understood to be working with Deloitte. The talks have sparked industry speculation that Office Outlet is looking at a company voluntary arrangement (CVA), an insolvency procedure that can be used to shut stores and reduce rents, The Sunday Times relates. Office Outlet employs 1,000 people in 96 stores, according to its latest accounts, which cover the year to May 2017, notes The Sunday Times. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2018. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *